The need for Critical Illness cover has once again moved into the spotlight on the back of crucial findings from Cancer Research UK. They now predict that 1 in 2 of the UK’s population will develop Cancer at some point in their lives. Combined with the ground-breaking advancements in treatment pushing cancer survival rates beyond the ten year mark for half of adults diagnosed, protecting your clients and advising them on Critical Illness cover continues to be an essential part of your role as an adviser.
Sadly, despite the numbers the UK is drastically under-insured. This month’s Insight into Protection will explore some of the big issues, providing you with some of the facts and advice to raise awareness and discuss protection with your clients. We believe that by working together, we can close the UK protection gap:
What are the Facts?
50% of the UK population will develop cancer
It is still so surprising how many of the general public are unaware of the real numbers surrounding Cancer diagnosis and survival rates. It is a difficult and sensitive subject to tackle, but whether it be through loved ones or personal experience, a large number of us will likely be affected by the disease. Sadly, it can often take a tragic occurrence to make us stop and think, which is even more reason to encourage your clients to approach Critical Illness proactively.
50% of adult cancer patients are predicted to survive 10 or more years
Cancer survival in the UK has doubled in the last 40 years, a clear indication of the steps we have made to battle this terrible illness. It is this crucial fact that will be pivotal to your client protection discussion. This is difficult, as most people instinctively protect material investments such as their home and goods. But they will also want to cover themselves against the most likely scenario, which means given the facts, clients will want to ensure they are financially covered.
UK Households spend just £7.80 a month on medical insurance
According to the Office of National Statistics, under £10 is spent a month per household on medical insurance, compared to £22 spent on household insurance. Research from a top provider also suggests that 5.2 million UK mortgage holders who earn an income have no plan or protection cover in place to cover their mortgage repayments if they become too ill to earn, another reminder of the current UK protection gap.
Why is the UK lacking Critical Illness Cover?
Protection myths
One of the most damaging myths surrounding Critical Illness is that providers go out of their way to ensure they do not pay out on an insurance claim. This could not be further from the truth. In fact, several providers have proudly released figures regarding their Critical Illness claims for 2014, showing pay-outs of over 90%. One leading provider even announced that over half of their 2014 claims were settled within 21 days, with the quickest taking just two days to process. Reasons for the rare instances of non-payment were non-disclosure of medical information and more commonly, instances where illness definition was unfortunately not met.
Consumer reliance on state support, employer or savings
Unfortunately, some consumers believe that the state would cover them financially if they were not able to work for long periods. But state support is there to ensure individuals are not immediately put in a desperate situation, it is not there to protect an established lifestyle and maintain the financial commitments that come with it. Incorrect assumptions on how long employers would provide full pay, or how long savings would last are also common. So take the time to use current figures and calculations to show your client the facts around financial protection.
What can you do as an Adviser?
Prove your credentials
Nobody wants to be scared into buying a protection policy. Use software and applications such as the CIExpert comparison, to show your client the true value of their policy, not just the priced premium costs. LV’s Risk Reality calculator is just one of many useful tools that providers offer, to assist you in the sales process and provide your client with the cover they need.
Recognise the principles of TCF (Treating Customers Fairly)
Ensure that in no circumstance are you placing profit before the client, as this is not adhering to the FCA guidelines on Treating Customers Fairly. Instead, ensure your client has every chance to be fully covered, by providing clear access to all policy options that protect them against any chance of future financial detriment.
Make sure your client is completely covered
Although Critical Illness covers your client in the event of many long term illnesses, there are several reasons why Income Protection, Life or better still, a combination of the three could be more beneficial to your client. So tailor the advice you give to suit your client’s circumstances. There are even flexible protection options out there that include care, support and child protection, providing an even more comprehensive package for your client.
As an adviser, you have a tough job competing with comparison sites battling to offer the lowest premiums. But by beginning the conversation with the facts, proving your expertise and showing you are treating them as an individual, your client can walk away knowing they have been given every chance to ensure they are protected in the event of developing and surviving a Critical Illness.
Back in 2007 the Labour Government set a target of 240,000 homes a year to be built by 2016, in order to sufficiently meet forecasted demand. At current levels, the UK is quite a way off meeting this target. The National Planning Policy Framework (NPPF) highlighted that, “in the 12 months ending September 2014, only 117,070 houses were completed.” In fact, in 2012-13 the UK hit a post-war low of only 135,500 homes built.
But investigating and pinpointing exactly why the number is not being met opens up a minefield of debate; from the lack of social housing, limited building supplies, to the proposed link to poorly regulated immigration policies. Clearly a tricky subject to tackle with a myriad of issues, but this piece will dive in regardless and take a look at some of the possible causes for the UK’s current lack of housing:
Planning permission, red tape and local opposition
When UK house builders were surveyed earlier this year, they recognised that the house building target, even when modestly reduced to 200,000 by the Coalition, was in their eyes “unachievable”. This is a damming indictment from those at the front end, as they recognise that there are simply too many barriers preventing the UK from producing a free and fast-flowing house building system. The Home Builder’s Federation (HBF) pointed out that the current system is just “too slow, bureaucratic and expensive”. When questioned further, house builders suggested that the two main reasons for this are the planning system itself and local opposition.
The Coalition has made some moves to tackle these issues, such as slimming down NPPF regulations to streamline the system and increasing annual planning permissions close to 240,000. But Chris Walker, Head of Housing and Planning at Think Tank Policy, warns that not all permissions are built: “We probably won’t even get to 200,000 on the back of that 240,000”.
Affordable land, priority of profit and social housing
The charity Shelter points out that land prices have inflated “massively “in recent years. In fact, residential land prices rose 170% from 2000 to 2007, compared to house prices which rose 124%. Jeremy Blackburn, Head of Policy at the Royal Institution of Chartered Surveyors, suggests that public sector land is only one element. He emphasises the importance of actively encouraging private landholders to also release sites for homes.
Under the current system, house builders are not forced to use land that is bought, which could change under a Labour government with their “use it or lose it” policy. This would lead to house builders and developers being encouraged to build on land immediately, instead of gradually releasing properties in order to keep profit at maximum levels. It is business after all, therefore only strong state intervention for the good of the country can force the hand of house builders in the UK.
Several comparisons have recently been made between the private sector’s current domination of the house building market and the post-war boom of social housing. This era saw on average 100,000 public sector homes built a year, a trend that continued all the way through to the late 1970s. Although there is still much scope and need for private sector building in the UK, it has simply not produced enough homes on its own in recent years, which suggests an emphasis on social housing in the near future is fast becoming a necessity.
Materials, labour and small business
As we have already covered the grass roots of house-building, it is important that we also look at the production side of the industry. It is vital to ensure that we have the labour and materials needed so that once buildings have been approved, the process can move forward quickly, economically and cost-effectively. Planning permissions were last year granted on 230,000 homes, more than an improvement to previous years; but do we have the necessary materials and skills to produce the homes and meet demand?
Matthew Pointon, property economist at Capital Economics, suggests that “the surge in demand in late 2013 and early 2014 led to materials such as bricks running out”. According to monthly reports from the Department for Business Innovation and Skills, and the Office for National Statistics, stockpiles of vital building blocks dipped to 323m at the end of October 2014, down almost a third from 2012, and massively down from stocks of more than 1bn recorded in 2009.
If the UK wishes to meet the housing demand, it will also need to address the current shortfall of skilled labour, such as bricklayers and construction workers. In response, tens of thousands of new housebuilding jobs and apprenticeships are up for grabs under a deal struck in November 2014 between ministers and the industry. But training a labour force needs time, with the government even proposing bringing former military personnel onto building sites to cover the shortfall of labour.
An important area of the industry that has seen one of the biggest declines, is the number of small to medium businesses that are able to develop land. In 2007, there were 15 firms providing more than 2,000 homes a year. The following year there were just six. The effects of the financial crisis have exacerbated the issue by restricting lending criteria and making it difficult for small business to invest and gain traction in the market. In fact, data from the HBF shows how the number of firms in England and Wales building 100 or fewer units a year fell significantly over the 24 years preceding 2013.
The government is attempting to put strong solutions in place to solve the issue, but many experts feel more needs to be done before we see the results and numbers needed to solve the UK Housing Crisis.
What I love about this industry is the constant changes and challenges we face, often we look back and find our businesses are stronger as a result.
Take the quality metric for example, lenders decide that they were no longer talking about sales volumes but had a whole new agenda about quality. Huge metrics were drawn up for networks with various combinations with which our appointed representative firms would be measured. Some were so complicated it was difficult to interpret them.
Over time they were tweaked and more information was shared with the networks, as a level of trust was built up for the first time with lenders and their fraud and risk departments.
As a result we all know and understand so much more. We are able to recognise information that needs to be challenged from day one. Many cases that may have potentially been a fraud case don’t get through the door and once you know what to look for, it is so much easier to protect your business and deal with the right clients.
However, one of those metrics has always puzzled me – how can networks and brokers improve on the number of cases that go into arrears?
Divorce, death, illness, redundancy and financial hard times are all reasons for falling behind with payments but they are not events that the broker can predict when arranging a mortgage. It is, however, a relevant discussion to have with the customer and therefore providing protection for them plays an important part in the advice process.
However, it may be time for the lender to accept that if they are unable to give the broker any information on cases that are in arrears, including client name, brokers can do no more to cover this aspect.
The lender holds the data and the lender makes the ultimate decision to lend. They currently have little interest as to whether there is a policy in place to protect the client’s income which could prevent arrears in some cases. Maybe it is time for lenders to not only review the metrics but look at addressing the issue of protecting for the future when arrears may not be as low as they are now.
What I love about this industry is the constant changes and challenges we face. Often we look back and find our businesses are stronger as a result.
Take the quality metric for example, lenders decide that they were no longer talking about sales volumes but had a whole new agenda about quality. Huge metrics were drawn up for networks with various combinations with which our AR firms would be measured. Some were so complicated it was difficult to interpret them. Over time they were tweaked and more information was shared with the networks, as a level of trust was built up for the first time with lenders and their fraud and risk departments.
As a result we all know and understand so much more. We are able to recognise information that needs to be challenged from day one. Many cases that may have potentially been a fraud case don’t get through the door and once you know what to look for, it is so much easier to protect your business and deal with the right clients.
However, one of those metrics has always puzzled me – how can networks and brokers improve on the number of cases that go into arrears. I feel that once the robust advice process has met regulatory standards and the lenders have used all of the systems they have available to check previous history, what else can be done at that stage to ensure the case never goes into arrears?
Divorce, death, illness, redundancy and hard times are all reasons for falling behind with payments but they are not really events that the broker can predict when arranging the mortgage. It is however a very relevant discussion to have with the customer of course, as many of these events are likely to happen and therefore providing protection for them plays an important part in the advice process.
However, it may be time for the lender to accept that if they are unable to give the broker any information on cases that are in arrears, including client name, brokers can do no more to cover this aspect.
The lender holds the data and the lender makes the ultimate decision to lend. They have access to far more information than the broker. They currently have little interest as to whether there is a policy in place to protect the client’s income which could prevent arrears in some cases. Maybe it is time for lenders to not only review the metrics but look at addressing the issue of protecting for the future when arrears may not be as low as they are now.